Kishore Biyani's Future Group to merge HomeTown with FabFurnish?

Picture source: ThinkStockFuture Group is considering spinning off furniture retail unit HomeTown to merge it with online retailer FabFurnish and create a separate listed entity with a target revenue of Rs 1,000 crore by the end of the next financial year.

HomeTown will be the biggest vendor on FabFurnish, which Future Group bought last month for about Rs 20 crore from German incubator Rocket Internet. “While it still not a board decision, we could still look at listing it as a separate entity because otherwise you can’t create value,” said Kishore Biyani, CEO at Future Group, which will re-launch FabFurnish on Thursday.

“Our aim is to create some value in this business. With FabFurnish, we will be creating the largest home furnishing and decor business in the country.” Competition is heating up in India’s furniture industry, three-fourths of which is controlled by standalone stores and carpenters.

About half a dozen ecommerce companies, including Flipkart and Amazon, have entered the market in the recent past. HomeTown has 42 stores at present and plans to add eight by end of the year.

The company said the average ticket size at HomeTown is about Rs 44,000, which is not easily matched at online portals. Apart from increasing sales in the furniture business, Biyani is targeting earnings before interest, taxes, depreciation and amortisation of Rs 40 crore-Rs 50 crore in the current financial year from the combined entity.

“Our strategy is to not increase the cost and to expand the business. We are not going to be top-line driven. That’s how we are going to make FabFurnish profitable in another three months,” he said.

Sweden’s Ikea, the world’s largest furniture retailing chain, will open its first store in India early next year in Hyderabad and plans to open 25 stores — each large enough to fit about four football fields — in the country by 2025. Rising demand for high-ticket items that offer big margins is driving foreign interest in India’s furniture industry, market experts said

In October, Japanese housing and building materials trading firm Sumitomo Forestry bought a 26% stake in Indian modular furniture manufacturer Spacewood for about $14 million (Rs 91 crore), making it the first foreign direct investment in a furniture business in the country. Future Retail is also gearing up for the launch of Bigbazaar.com, its omni-channel business, in the next three months.